Strategy of Petroleos de Venezuela: a national destruction plan

23.08.05 | Venezuela plans on developing its oil potential while excluding the most experienced and knowledgeable companies. It is joining forces with second-rate partners while, at the same time, setting unattainable goals.
Last week the government presented its “strategy plan” for PDVSA 2006-2012. At first glance it would seem like a sensible plan for investing $56 billion over a seven-year period to increase production to 5,837,000 b/d by 2012.

Nevertheless, following a second glance, the plan no longer seems that sensible.

First of all, it sets an unrealistic production goal of 4,019,000 b/d for PDVSA, on its own. This would mean an additional 2.3 million b/d in seven years –a totally unattainable goal when we consider that the “old” PDVSA was able to increase its own production by some 900,000 b/d in seven years –and that was considered quite a feat. The “new” PDVSA has neither the experts (because they were fired) nor the equipment (much of it being used in other countries), making the task even more of an uphill struggle
To put it simply, the announced target is unrealistic.

Neither will they be able to achieve the new developments announced for the Orinoco Belt -- 615,000 b/d —- at least not the way the government intends to go about it. According to the announcement made by Minister/President of PDVSA Rafael Ramírez, part of the Belt will be divided into 27 blocks, to be offered in early 2008, leaving just four years in which to achieve the announced capacity. Too little time for projects as technologically complex as these would be.

Even more worrisome is the announcement that seven state-owned companies will be taking part in a 30-month process for “certification” of the Venezuelan reserves, blackballing the private companies that really know the business.

Most regrettable of all –in addition to being arrogant and presumptuous– was the expelling of Shell from the Mariscal de Ayacucho, formerly Cristóbal Colón, gas project. The sad, ugly and amazing thing about the announcement is that this is a transnational corporation that has worked everywhere in the world and has a 90-year unblemished history in Venezuela. Now it will be PDVSA, on its own, and Petrobrás, who will work the offshore gas fields north of the Peninsula of Paria.

The item that causes the greatest concern of all is that, according to reports, the last straw during the negotiations with Shell was that the government refused to set a profitable price for selling the gas on the domestic market. Apparently the intention is to sell the gas at a loss comparable to the losses incurred from the sale of gasoline.

Lacking a businesslike approach, the Venezuelan oil industry has no future.